Thomas Piketty: Courting Controversy
If there was one person who could be likened to a rock star in the world of economics, then Thomas Piketty is it. He’s a showman, an artist, and professional ruffler of feathers. Just like any rock star, he also has a huge fan base and an army of followers who hang on his every word. But, just as everyone has their own particular style in music, there are many who find Mr Piketty leaves an uneasy taste on the more sophisticated palate. The way he plays up to the adulation and struts like a cocky lead singer doesn’t always sit well among his peers.
But does that necessarily have to be viewed as a bad thing? In a world that is notoriously grey and often profoundly dull, isn’t the odd colourful character, waving the proverbial microphone stand at the establishment, a welcome crash of the cymbals in an otherwise sombre ensemble? There are many who think so, and just as many who think not.
One thing for certain with Thomas Piketty, however, remains the fact that he isn’t going away. He can’t. He gets too many things right. Whether the establishment likes him or not, it can’t be denied that Mr Piketty has a real knack for hitting the right notes in the financial world.
At 44, several peers regard him as a young upstart. Yet, Mr Piketty boasts an impressive list of qualifications betraying a lifetime of resolute study that cannot go ignored. After scientific preparatory classes, he gained a Baccalaureate by the age of 18 before entering mathematics and economics studies at École Normale Supérieure.
By age 22, he had a PhD and the undying praise of the London School of Economics before crossing the Atlantic to become an assistant professor at the Massachusetts Institute of Technology. He currently holds professor status at both the Paris School of Economics and the London School of Economics, as well as being directeur d’études at the École des Hautes Études en Sciences Sociales in France.
As left wing as they come, Mr Piketty penned his anti-capitalist thoughts in the 577-page book Capital in the 21st Century. In the tome, he rails against a world obsessed with wealth accumulation and clarifies this obsession’s effects on global inequality. He clearly has a point – the book sold 1.5 million copies worldwide in five languages, catapulting him to even more international stardom and guaranteeing him top billing as he delivers the Nelson Mandela Lecture in Johannesburg later this year.
With such a colossal number of people buying into Piketty’s views, there must be something in his outspoken theories.
His protestations against unfettered capitalism are based on impressive research. Mr Piketty has ploughed through a century’s worth of income and wealth data for the United States and Great Britain, as well as about 150 years of French tax returns to arrive at his conclusions.
His work hinges on rates of return and growth. Mr Piketty charts a pronounced rise in wealth inequality up to the 1929 Great Depression when disparities abruptly lessened only to stabilise during the period of post-war global prosperity. From the 1970s, the gap has gradually broadened again reaching similar levels to those recorded in 1929.
Mr Piketty argues that a critical point is reached once the rate of return on capital surpasses the clip of overall economic growth as expressed by the productivity of labour. This, says the Parisian, is when inequality begins to rise as capital reaps increasingly higher rewards than labour. His narrative will often cite the US as the classic example to prove this point, reminding his followers that more than a third of US wealth is now owned by just 1% of the population.
In short, Mr Piketty’s life goal is to urge the world to restrain its penchant for prizing the accumulation of capital over and above the value of productive labour, thus recognising that rising inequality is not an accidental by-product of capitalism, but is in fact an essential part of a skewed system which, left to its own devices, tends to self-destruct.
As well as calling for the state to redress wealth disparity – and thus save capitalism from its internal contradictions (thank you, Karl) – Mr Piketty also proposes a supranational, and very polarising, solution: a global tax on wealth. As popular as his beliefs are, he has plenty of experts queuing up to shoot him down.
Remarkably, liberal economist and Nobel Prize winner Paul Krugman laid down his Piketty flag and tore into the Frenchman’s latest book – an English language release of his 1997 effort The Economics of Inequality – as it climbed the hardback charts. Normally a reliable banner man of Piketty, Mr Krugman took issue with the fact that his counterpart originally wrote the work while in his twenties and was re-releasing it with very few changes, almost going as far as suggesting it was a lazy attempt to rake in some book sales.
“I’m sorry to be so negative about a book by such an important figure in our economic thinking,” slammed Krugman. “Releasing this youthful effort as if it were a new contribution does a disservice to readers and I’d argue that with the author himself.” Mr Krugman, however, utterly failed to find fault with any of Mr Piketty’s findings and conclusions.
Love him or loathe him, you can’t argue that such a controversy-prone figure as Thomas Piketty has a place in the hall of fame of modern economics.